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Journey

Reading this book called Good Value by Stephen Green, Chairman of HSBC, who is also an ordained priest. A fun book to read detailing the history of man, urbanisation, and commerce and how it leads into the credit crises.

In the book, the following website - Journey of Mankind, was mentioned. In this interactive map, it shows us our origin and how mankind spread out and took over the known land. In particular, we see that we spread out from a single point, and finally 'meet again' after thousands of years as we take over more land. Then political and social pressure will mount, aka inter-state and inter-racial, and definition of sovereignty might even take on a new meaning.

While reading 论语, it laid out a road map to learning and constant renewal. Singapore loves to talk about 'skills upgrade' and 'technical upgrade'. However, witnessing the staff in my dad's office, i think that improvements and learning must be internally driven and not forced up by others. It pains me that while learning opportunities abound, many of them choose to stick to what's comfortable (and turning obsolete) then to just walk over to the other person and ask "How is this done, why?". When the next downturn comes...guess who will be at risk of being retrenched?

I love this line "学而不思则罔，思而不学则殆" 。baidu's explanation as follow: 一味的读书，而不思考，只能被书本牵着鼻子走，就会被书本所连累，从而受到书本表象的迷惑而不得甚解。所谓尽信书则不如无书。而只是一味的埋头苦思而不进行一定的书本知识的积累，进而对知识进行研究推敲，也只能是流于空想，问题仍然不会得到解决，也就会产生更多的疑惑而更加危险。只有把学习和思考结合起来，才能学以致用。

南怀瑾谈到这段，说了以下让人反思的话，“少年教育的问题，首先要注意他们的幻想，因为幻想是学问的基础... ...学问、事业... ...都建立少年时期这一段。一个人的一生，也只是把少年时期的理想加上学问的培养而以，到了中年事业就是少年理想的发挥。... ...思想没有学问去培养则‘殆’，危险。”

Watching NDP 2010, there was a video clips of kids telling Singapore their dreams and aspirations. I told my dad that there were only kids in the clip cuz if you interview the elderly, they'll tell you they dream that their ankles will not ache, if you interview housewives, they'll tell you they dream that their kids come home for dinner and show some appreciation. And if you ask most people in their 40s is this the life they thought they'll lead when then they were in their youth, most will tell us no.

Youth is a wonderful thing. What a crime to waste it on children.
George Bernard Shaw (1856 - 1950)

Inflation and Unemployment

It has been almost 2 months since I last blogged. Friends asked me what am I doing since I don’t start work till sept, and my answer has been always, Eat, Sleep, Read.

We all know that learnt unemployment and inflation is bad, but until we experience it ourselves, it is just ‘textbook’ talk. Since the day I was born, inflation has been benign and unemployment in Singapore was generally low. When I was in Argentina, I asked my guide what was it like during the Peso crises and general devaluation of peso (and inflation in local dollars). He said that many people lost their savings and affected their livelihood.

For instance, you could be working in Argentina collecting your pay in USD. Say you’ve saved $1,000 USD, which also translate to 1000 (Argentinean dollars) ARD before the devaluation. During the period of crises, bank will only allow you to withdraw in ARD even though you’ve deposited USD!!! If you insist on withdrawing in USD, they’ll convert it at the current (devalued) exchange rate and you’ll lose up to 30% of savings in a month! Also the super rich were withdrawing USD from local banks and depositing them in US banks, so local banks ran out of USD… bank run began and queues formed for days outside banks, ATMs got trashed, and many Argentineans who were studying overseas has to go back to Argentina because they can no longer afford expenses in USD.

Unemployement in South America is not low. From CIA Fact Book: Peru 8.1% Argentina - 8.7%, Chile – 9.6%, and official figures are probably under-reported. Through observation, you have a huge part of city life involved in daily protests on the streets. A very unproductive activity, all the squabbling yet nothing gets resolved. Also, when a person is unemployed and poor, he has got nothing to lose and no future to look forward to, law and order will not prevail. Anarchy follows. Economic destruction will tear apart a country's social fabric.

Percentage of population under poverty line: 20% (Chile), 44.5% (Peru) and 14.9% (Argentina). Looking at the young beggars on the streets who have their young ones strapped to their back, I can only see the vicious cycle of poverty repeating itself over the next generation. Very sad.

How fortunate that we are in Singapore! Unemployment 3.8%, Percentage of population under poverty line: Not Applicable!!!

Of course all statistic lies. At least these are not chronic problems in Singapore.

Me being currently fully unemployed, I see the risks that unemployment brings: you can sleep as late as you want, stay at home whole day in the clothes you wake up in, eat and watch Scrubs and True Blood (weird combi in know!) and then sleep as late as you want again. Soon, your brain goes numb, your body goes flabby and soon I’ll be like the crazy mom in the movie Precious. Ewww……So now I put in extra extra effort to stay industrious.

Benjamin Franklin on laziness:
1. Sloth, like rust, consumes faster than labor wears, while the used key is always bright
2. Dost thou love life, then do not squander time, for that’s the stuff life is made of
3. Lost time is never found again
4. He that riseth late, must trot all day, and shall scarce overtake his business at night
5. Drive thy business, let not that drive thee
6. Industry need not wish
7. He that lives upon hope will die fasting
8. There are no gains, without pains
9. Plough deep, while sluggards sleep, and you shall have corn to sell and to keep
10. One today is worth two tomorrows
11. Have you somewhat to do tomorrow, do it today
12. Be ashamed to catch yourself idle
13. Let not the sun look down and say, inglorious here he lies

Around the world...in more than 40 hrs

Getting to Lima, Peru, is challenging, first SIA couldnt tag my bag to Lima then they found 'a leak' on the plane from Narita to Houston, so it was delayed for 2 hour. Customs at Houston took over 1 hr. And i missed my connecting flight to Lima. Haha. The next flight out? 1 day later.

So...continnental put me up at a nice hotel near the airport, with complimentary dinner, breakfast and lunch...so far need not spend a extra dime during the one day delay. What more I get to claim for travel insurance! haha, this is the main purpose for my purhcase of travel insurance, while in queue during transit, i was busy reading the many many terms and conditions stated on my travel insurance written in (i think) font size 6.

I guess i'll just continue to expect lots of distruptions to this trip, and rejoice when everything falls into place :)

Saw that the hotel gym is open, maybe i should exercise....who am I joking! Going back to my warm soft bed for my post- (complimentary) breakfast, pre-lunch nap. Mom told me there's no need to bring a belt, she's sure i'll fill out my jeans soon. Momma's right. Haha.

By the way, finally watched Forest Gump yesterday on flight. What a wonderful movie. Love the quote 'My momma always said, "Life was like a box of chocolates. You never know what you're gonna get." '

Leap Year starring the beautiful Amy Adams is a delightful little movie, super sweet, yet not (yet) nauseating. From the movie, when a bride was toasting the groom, "May you never steal, lie, or cheat, but if you must steal, then steal away my sorrows, and if you must lie, lie with me all the nights of my life, and if you must cheat, then please cheat death because I couldn't live a day without you. Cheers! " awww....

haha. Lastly, got to watch Gambling Apocalypse (Kaiji) on flight. The simple idea that overconsuming and debt is the woes of all the 'losers' on board is such a powerful idea. We can work our butt off, but if we are overspending, we'll be forever getting into more debt. As our ovespending grow in proportion to our income, your absolute amount of debt will grow. There will be a tipping point where interest on debt will consume our entire income, this is where we'll forever be stuck in our-homemade hell.

Conversely, there'll be a point where interest on asset return will outstrip our total expense. Nope, this will not be homemade heaven. But life if hard enough as it is, there'll no need to inflict more pain on it ourselves.

Ok, back to my nap. Maybe i'll blog in Spanish next time. It'll consist of 4 words, No, Si, Gracias. Muahaha.

Adios!

Charlie Munger on Lee Kuan Yew

Munger was full of praise for Lee in the recent Wesco annual meeting.

From a forbes interview:

How would you make Paul Volcker look like a sissy if you regulated Wall Street?

Munger: I would economically restrain what investment banks and banks do more than he would. I would separate derivatives from the basic bridges of civilization. We don't want civilization contaminated by extreme speculation. I'd ban all the derivatives trading except for metals and commodities. The new stuff is a marvelous gambling game. It swamps any commercial transactions that are needed. Gambling does not become wonderful just because it pertains to commerce. It's a casino. You shouldn't be able to use $500,000 to do a $5 million trade.

If I were the Lee Kwan Yew (formidable former Singapore leader) I'd make finance far less attractive to go into. I'd raise taxes, maybe put a Tobin (Yale economist) tax on all transactions. If Warren was the benevolent despot of the U.S., these things (derivatives) would have never existed. Warren wrote a letter in 1982 objecting to the creation of the S&P 500 derivative contract. Its message: This is going to do more harm than good. He tried to prevent it from happening. I think he believes civilization would be better if they didn't exist. Still, Warren has great difficulty not buying a mispriced item in the financial market. We bought derivatives even though we didn't believe in their existence.

Excerpt from the Wesco annual meeting notes from The Inoculated Investor blog:

Is there an example of a prudent decision like the Marshall Plan after WW2?

The George Washington of Singapore, Lee Kuan Yew, decided to marry the smartest girl in his class. Their son is now the PM of Singapore. He was a very practical man. He didn’t want people dying of Malaria so he drained all the swamps and didn’t care if a little fish went extinct. He didn’t like the drug problem and he looked around the world to solve the drug problem. He found the solution in US by copying the US Military’s policy. Any time you can be tested and if you fail you go to jail. If something was going to grow like cancer he would check it hard with the wrath of God. He turned a country with no resources or agriculture into a prosperous country, starting from 0 mph. We need to pay more attention in our country to the Singapore model.

They hate Lee Kuan Yew in liberal arts colleges. They hate that Singapore doesn’t allow free speech. But, time after time he has been successful and even the leaders of China came to Singapore and learned from Lee Kuan Yew. Charlie doesn’t care whether the cat is black or white, as long as it catches mice. In many respects the US is too damn permissive. We don’t step hard enough on things that can grow into trouble. If some of the silly accounting practices had been stopped, then none of this would have happened

On accounting for financial institution
There is Alice in Wonderland and nut case accounting in the US. These people need to be thrown out and people who think more like Lee Kuan Yew need to be installed. Jamie Dimon of JP Morgan is actually complaining about this but he is the only one. Charlie takes his hat off to him but his derivative book needs to go away. He should not run a gambling parlor next to a legitimate business. Actually, in recent years, some of our banks actually bought casinos. “Why run a casino in drag when you can run a real casino?”

On the distorted incentives between banking executives and regulators
There is a huge pay discrepancy between regulators and bankers. What happens when they finish public service and then move into the private sector? Should that be curtailed?

Munger thinks that the revolving door between Wall Street and the US government regulators is a big problem. Lee Kuan Yew of Singapore decided to pay civil servants more to get around this problem. America’s main problem is not corruption-- it is cognitive inadequacy.

On moving to Singapore
Munger spoke very highly of Singapore. A member of the audience asked that given the problems in the US, would he ever move to Singapore?

Munger said he would never leave the US. Singapore could be a good place for someone else. If crime tripled in the US them Singapore could get an influx of rich people from the rest of the world. He doesn’t know what is going to happen but he will still be here (Los Angeles). He loves the US, despite the flaws.

I'm in the MOST SCREWED UP UNIT EVER!!!! Where got call-up people for ICT then cancel one month after issuing notice one! Stupid ICT screwed up my grad trip.

Bunch of incompetents maggots!!!!!

Now i rush back from my Latin America trip for nothing, but fixed air ticket already bought. Bloody fools.

Goodwill

Of course the goodwill i'm that i'm thinking about is nearer to the accounting kind, as compared to the chim chim moral philosophy kind which i was introduced to while doing the Ethics course.

According to FRS 103,

IN10 - The FRS requires the acquirer, having recognised the identifiable assets, the liabilities and any non-controlling interests, to identify any difference between:
(a) the aggregate of the consideration transferred, any non-controlling interest in the acquiree and, in a business combination achieved in stages, the acquisition-date fair value of the acquirer’s previously held equity interest in the acquiree; and

(b) the net identifiable assets acquired.

The difference will, generally, be recognised as goodwill.

Core principle :

IN5 An acquirer of a business recognises the assets acquired and liabilities assumed at their acquisition-date fair values and discloses information that enables users to evaluate the nature and financial effects of the acquisition

Which leads me to think that Prof JJ is absolutely correct, goodwill should be called BADWILL. It is the bad will of the manager that causes loss for the acquirer shareholder. Essentially, the more you pay over the fair value the asset, the greater the goodwill. What I don't get is - What's so good about over paying?

If I own a roti-prata store, and sell it to Company P(urchaser), my book value could be my stove and woks which have a worth 100k. But P is required to measure the value all the identifiable fair value in the business and get to the goodwill figure. So if P pay me 500k, and identified 100k worth of brand name/patented curry recipe, P will have to record a 300k goodwill figure.

If i used to earn around 40k per annum on my hard assets, the return on asset was 40%.

Post purchase, the return on asset for P including goodwill will be about 8%. So what is so GOOD about buying good assets at fancy price?

On a side note, we had a great evening spent at Coffeenation. We sang in C major key into the night; and the staff was warm and friendly despite us not ordering much after the main course. I believe their attitude and service had generated tremendous goodwill. If they keep this up day after day, their economic moat will widen in the Bugis/Bali Lane area and they may earn very satisfactory return on capital. This will not be captured by accounting numbers, but it is nevertheless a real advantage they can have over competitors like Swensens or Fish and Co..

We should understand that "It is better to be vaguely right than exactly wrong.", but as students get more skillful at complex mathematics and excel spreadsheet, i fear that we are more often "precisely wrong" than not.